Manufacturing has served Durban well, but future growth will come from other sectors, writes Janice Healing

27 February 2005

MANUFACTURING has long been the economic lifeblood of Durban, with gross domestic product in this sector valued at R35-billion in 2003.

But the city’s management cautions that Ethekwini, as the Durban municipal area is now known, cannot continue to rely on its manufacturing and primary processing industries.

City manager Michael Sutcliffe says that, although these economic activities remain the most important in terms of employment and output, they will be unlikely to generate rapid growth and employment creation in the next few years.

Manufacturing and tourism are dominant in the city’s economy. Manufacturing accounts for 26.2% of Durban’s gross value add in 2003, while tourism spend by foreigners and locals was between R5-billion and R6-billion.

"While Ethekwini’s growth is solid, there is still much to do as the growth performance is close to the average performance of South Africa’s major cities. We need to outperform them and set the trend, not be followers," says Sutcliffe.

"Since 1998 the services sector has been the main generator of jobs in Durban, delivering growth in excess of 5% a year.Unfortunately, much of Durban's service sector is in low-skill, low-wage and low-tech activities, and the owners of the major tourism assets and money spinners are still predominantly white," says Sutcliffe.

Sutcliffe believes that the main drivers for the city’s growth in 2005 will be in retail, tourism and real estate, as well as manufacturing sectors such as the automotive industry, chemicals and plastics, metal, and paper and wood products, and further infrastructure spending.

He expects growth to come from the expansion at the port of Durban as well as port-related transport and logistics, while export manufacturing will depend on the rand’s performance.

Growth in the city has averaged 2.7% a year between 1996 and 2003 and initial estimates put the local GDP growth in 2004 at between 3.8% to 4.0%.

Sutcliffe says several new projects are having positive effects, such as uShaka Marine World, River Horse Valley, the Gateway area and Umhlanga Ridge, the two casinos, improvements along the beachfront, and improvements to infrastructure.

"The city is now firmly on the international tourism map and its tourism product is improving steadily, although there certainly is room for improvement. The retail sector has performed very strongly and there has been good growth in building and real estate. The transport and logistics sector continues to grow although there is much need for improving infrastructure to support this sector," says Sutcliffe.

"We are working closely with the private sector to support their investment initiatives and to develop the most effective economic strategies. Toyota’s escalating export performance and its position as the number one vehicle manufacturer in the country is a key contributing factor to the city’s success."

Toyota SA plans to export 100000 vehicles a year by 2010 which will require production at its manufacturing plant in Prospecton to increase to 200000 units a year.

Sutcliffe says in terms of the city’s 20-year plan, it will become a centre of sustainable development.

"We will develop new sectors such as those focused on renewable energy technologies and materials recycling, both of which hold vast potential for SMMEs. Also, we are positioning Durban as the lifestyle city of the Southern Hemisphere and the African continent and will further entrench and develop the tourism, entertainment, media and sports sectors."

The Ethekwini GDP reached about R113-billion in 2003. There was growth virtually across the board compared with 2002, with the retail sector leading the way.

Sutcliffe says after spending much of the 1990s in the economic doldrums below 2%, the city’s fortunes have experienced steady but significant progress and real growth has been at 2.7% a year between 1996 and 2003.

"This is projected to rise to 3.8% in 2005 and remain sustained in the 3% to 4% range for the next few years, reflecting a general strong position in the South African economy and increased local confidence," says Sutcliffe.

No official data is available for 2004 yet but the local GDP is estimated to have grown by 3.8% to 4% in real terms. For 2005 it is expected to grow slightly faster at around 3% to 4.5%.